At a court hearing Tuesday Novell surprised a lot of people and withdrew its claim that SCO damaged it to the tune of $100 million by reneging on a deal supposedly assigning its Unix IP to UnitedLinux, the failed Linux consortium, in 2002.
Novell – or rather its allegedly independent Nuremberg-based German subsidiary, SUSE Linux GmbH – originally made the claim under seal to an arbitration panel in Switzerland that was supposed to decide whether SCO had in fact turned the IP in question over to UnitedLinux.
UnitedLinux was supposed to produce a common Linux distribution and was composed of SCO, Turbolinux, Connectiva (now part of Mandriva) and SuSE, the Linux distribution that Novell subsequently bought with IBM’s money. Each of the companies was supposed to own 25% of a Delaware LLC that held the IP and Novell claims that the LLC then turned the IP rights over to SUSE.
Anyway, Novell withdrew its charges in bankruptcy court in Delaware today – where the claim publicly surfaced for the first time last Wednesday – right before the bankruptcy judge decided to stay the Swiss arbitration for as long as SCO remains under his jurisdiction – a lost for Novell.
Although it’s not bankrupt, SCO successfully moved its litigation against Novell to bankruptcy court when it appeared that the federal court in Utah that was hearing its slander-of-title case against Novell was biased against it.
It is assumed that Novell was trying to score brownie points with the Delaware court by withdrawing its $100 million claim when it sensed that the tide was turning against it.
See, SUSE Linux GmbH, acting through Novell, contested Delaware’s jurisdiction over the Swiss arbitration. It conceded that position too on Tuesday in hopes of keeping the arbitration on the front burner.
The stay in the arbitration proceedings puts SCO one step closer to lodging an appeal with the appeals court in Denver seeking to overturn the Utah decision that Novell owns the Unix copyrights, the questionable summary judgment that sent SCO to Delaware in the first place.
SCO can’t appeal to Denver until the slander-of-title case it filed against Novell in Utah goes to trial – any more than it can file an appeal if the arbitration is still in its way – and anyway it’s believed the Utah judge, Dale Kimball, intends to find in favor of Novell and slap a constructive trust on SCO that would make it impossible for SCO to appeal.
The bankruptcy judge, who ruled any constructive trust coming from him in August, suggested Tuesday that he doesn’t have to send the case back to Kimball for a decision – as Novell has petitioned and as most people thought would happen – but that he himself could hear the case, which revolves around whether or not SCO owes Novell any of the $25 million it collected as Unix royalties from Microsoft and Sun Microsystems.
Novell claims it is due all of that money plus interest – a sum amounting to over $32 million that SCO can’t afford to pay and that would deny it its appeal since it would have to post a bond to appeal – and it's hard to do that on an empty purse.
The Delaware judge took the issue of where the case should be heard under advisement and also reserved judgment about whether SCO could sell its Unix business to York Capital, as planned, for $16 million pending a hearing on November 16. The sale would help insure that SCO gets its day in court by putting change in its pocket.
As that deal is constructed, if SCO did sell to York SCO would still own the IP needed to prosecute its case against IBM charging the computer giant with stealing SCO’s Unix code and putting it in Linux, the case that got the Linux contingent’s kickers in a twist.
SUSE initiated arbitration to defend against SCO’s claims that SUSE in particular and Linux in general infringed SCO copyrights, a subject whose waters have by now been terribly muddied.
Novell has claimed that before SCO started litigating in 2003 SCO begged Novell to give it the Unix copyrights.
SCO however claims that it merely asked Novell to clarify that SCO owned the copyrights.
SCO has subsequently presented evidence in court that Novell left the copyrights in the New Jersey office that it turned over to SCO and that Novell engineers changed the copyrights in the code to read SCO instead of Novell, evidence that Utah ignored in deciding the copyrights belonged to Novell.
All of this is exactly the kind of stuff that Groklaw, the blog watching the SCO litigation and commenting on all the filings, never tells its readers about although it said it had three or four observers in court Tuesday.
So much for amateurs.
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